Step-by-Step Guide to Deed in Lieu of Foreclosure
What is a Deed in Lieu of Foreclosure?
In a Deed in Lieu of Foreclosure, the borrower transfers ownership of the property back to the mortgage company, and the borrower is released from most or all of the debt to the mortgage company. Everybody living in the property must relocate to a new home, and you then provide the deed (or title) to PennyMac.
When should you consider this option?
- you are significantly behind on payments
- you did not qualify for a loan modification (NOTE: If you have not asked your mortgage company for a loan modification, you should do this first, as this option allows you stay in your home)
- you are unable to sell your home through a short sale
Why is this option better than a foreclosure?
- you no longer owe the large debt to the mortgage company
- you avoid the public process of a foreclosure
- your credit is hurt less than it would be with a foreclosure
- you get a fresh start -- PennyMac offers cash assistance to help you relocate
What is required?
- The Title must be free and clear of any other debts owed (such as liens to HOA, COA, State or judgments, etc.)
- You must leave the property in broom-clean condition, with all personal belongings and trash or unwanted items removed by an agreed-upon date.
- You and all borrowers listed on the mortgage may be required to sign pre-closing documents and attend a closing for the property transfer.
What kind of Relocation Assistance is available?
Because this option requires you to move to a new home, PennyMac offers a one-time cash incentive to help with your relocation expenses, which you will receive at the closing, provided you have met all of the requirements above. The amount of the incentive depends on the state where your property is located, but could be between $amount and $amount.
Preparing the Required Paperwork for a Deed in Lieu of Foreclosure
- Hardship Affidavit Form – explains why you are behind on payments (lost job, etc.)
- Financial Worksheet – shows your monthly income and expenses
- Income and Asset Documents – you will need to provide documents that show evidence of all sources of income (tax forms, pay stubs, bank statements). This includes money from your job, your self-owned business, rental income on the property, pensions or other benefits, public assistance or unemployment, alimony and child support. A complete list will be provided to you when you begin the Deed in Lieu process, but it’s a good idea to begin collecting these items now.
- Other debts related to the home – you will need to provide documents and information on other debts secured by your home (such as home equity loans, homeowner association liens, tax liens or judgments).
- you are significantly behind on payments
- you did not qualify for a loan modification (NOTE: If you have not asked your mortgage company for a loan modification, you should do this first, as this option allows you stay in your home)
- you are unable to sell your home through a short sale
Why is this option better than a foreclosure?
- you no longer owe the large debt to the mortgage company
- you avoid the public process of a foreclosure
- your credit is hurt less than it would be with a foreclosure
- you get a fresh start -- PennyMac offers cash assistance to help you relocate
What is required?
- The Title must be free and clear of any other debts owed (such as liens to HOA, COA, State or judgments, etc.)
- You must leave the property in broom-clean condition, with all personal belongings and trash or unwanted items removed by an agreed-upon date.
- You and all borrowers listed on the mortgage may be required to sign pre-closing documents and attend a closing for the property transfer.
What kind of Relocation Assistance is available?
Because this option requires you to move to a new home, PennyMac offers a one-time cash incentive to help with your relocation expenses, which you will receive at the closing, provided you have met all of the requirements above. The amount of the incentive depends on the state where your property is located, but could be between $amount and $amount.
Preparing the Required Paperwork for a Deed in Lieu of Foreclosure
- Hardship Affidavit Form – explains why you are behind on payments (lost job, etc.)
- Financial Worksheet – shows your monthly income and expenses
- Income and Asset Documents – you will need to provide documents that show evidence of all sources of income (tax forms, pay stubs, bank statements). This includes money from your job, your self-owned business, rental income on the property, pensions or other benefits, public assistance or unemployment, alimony and child support. A complete list will be provided to you when you begin the Deed in Lieu process, but it’s a good idea to begin collecting these items now.
- Other debts related to the home – you will need to provide documents and information on other debts secured by your home (such as home equity loans, homeowner association liens, tax liens or judgments).
- The Title must be free and clear of any other debts owed (such as liens to HOA, COA, State or judgments, etc.)
- You must leave the property in broom-clean condition, with all personal belongings and trash or unwanted items removed by an agreed-upon date.
- You and all borrowers listed on the mortgage may be required to sign pre-closing documents and attend a closing for the property transfer.
What kind of Relocation Assistance is available?
Because this option requires you to move to a new home, PennyMac offers a one-time cash incentive to help with your relocation expenses, which you will receive at the closing, provided you have met all of the requirements above. The amount of the incentive depends on the state where your property is located, but could be between $amount and $amount.
Preparing the Required Paperwork for a Deed in Lieu of Foreclosure
- Hardship Affidavit Form – explains why you are behind on payments (lost job, etc.)
- Financial Worksheet – shows your monthly income and expenses
- Income and Asset Documents – you will need to provide documents that show evidence of all sources of income (tax forms, pay stubs, bank statements). This includes money from your job, your self-owned business, rental income on the property, pensions or other benefits, public assistance or unemployment, alimony and child support. A complete list will be provided to you when you begin the Deed in Lieu process, but it’s a good idea to begin collecting these items now.
- Other debts related to the home – you will need to provide documents and information on other debts secured by your home (such as home equity loans, homeowner association liens, tax liens or judgments).
- Hardship Affidavit Form – explains why you are behind on payments (lost job, etc.)
- Financial Worksheet – shows your monthly income and expenses
- Income and Asset Documents – you will need to provide documents that show evidence of all sources of income (tax forms, pay stubs, bank statements). This includes money from your job, your self-owned business, rental income on the property, pensions or other benefits, public assistance or unemployment, alimony and child support. A complete list will be provided to you when you begin the Deed in Lieu process, but it’s a good idea to begin collecting these items now.
- Other debts related to the home – you will need to provide documents and information on other debts secured by your home (such as home equity loans, homeowner association liens, tax liens or judgments).
